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The General Court of the European Union confirmed on Wednesday that creditors and shareholders who suffered losses due to the resolution of Banco Popular in 2017 are not entitled to compensation because they would not have been treated better if the bank had been liquidated.
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In several judgments – which are still under appeal at the Court of Justice of the European Union (ECJ) – the Luxembourg court confirmed the criteria of the Single Resolution Board (SRB), which concluded in 2020 that those affected had no right to be compensated because They would not have been better off if a liquidation had been carried out in accordance with the intended use of the company.
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Several affected shareholders and creditors appealed this decision to the General Court of the European Union, which today ruled for the first time on its legality and rejected all appeals.
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The court rejects the allegations that called into question the independence of the company that carried out the valuation of the bank – the consulting firm Deloitte – and were based on a violation of the right to be heard of those affected, since it considers that the expert based on a violation of the right to be heard by those affected, applied a correct methodology and made no obvious errors in the valuation of Banco Popular’s assets.
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“The result that an ordinary insolvency procedure would have led to would therefore have been the same as that of the resolution, so that the property rights of the affected shareholders and creditors would not have been violated,” the court said in a statement.
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The dissolution of Banco Popular in 2017, the first ordered by the SRB, led to its sale to Banco Santander for one euro, costing 11.4 billion euros, entirely paid by shareholders and subordinated debt holders, in line with the adopted European banking system standards were paid. after the financial crisis to avoid public bailouts.
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These provide that the SRB can use the Single Resolution Fund financed by banks to cover the losses of shareholders or creditors of a company subject to resolution if they have suffered losses greater than those suffered under regular insolvency proceedings would have. a Compensation.
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Following the liquidation of Banco Popular, the consulting firm Deloitte – which had prepared the reports that served as the basis for ordering the liquidation – was hired to evaluate the process and determine whether the liquidation was more beneficial to investors and depositors than a typical liquidation . .
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This third report concluded that the liquidation would have cost between 23.4 and 34.1 billion euros, more than the 11.4 billion that the liquidation had cost, so the SRB in 2020 after hearing the allegations of those affected came to the conclusion that he no longer had to pay them compensation since then – they would not have been treated better as a result of the liquidation.
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Banco Popular’s decision has been the subject of dozens of appeals before the Spanish and Community courts. In several previous rulings, the European judiciary has already confirmed the legality of the operation.
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